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Sustainable Value Chains

I used to work with a woman that said, “The only people who want a change are wet babies, and even they scream.” Globalization is imposing many changes that disrupt our lives and our communities. Companies are forced to rationalize their production to keep up with consumer demands for innovative and cheap products and investor demands for double- digit returns. Communities in richer developed economies losing jobs are challenged to preserve social services despite an eroding tax base, while communities in low- cost developing countries gaining factories are challenged to add infrastructure to support the new production facilities and rapidly expanding environmental pressures. These pressures have led to growing public demands for corporations to commit to more sustainable business practices and to assume responsibility for and manage the environmental impacts of their globally- dispersed suppliers. Yet there is no standard global solution for the complex mix of environmental and social problems. Differing definitions of sustainability or corporate social responsibility across regions and cultures, lack of recognition from financial markets, price conscious consumers and the absence of clear and consistent metrics to help evaluate investments are cited as critical barriers to effective implementation. The World Business Council for Sustainable Development (WBCSD), UNEP, and SETAC have partnered in a sustainable value chain initiative to explore these issues and develop practical approaches for managing the impacts of globally dispersed suppliers. A working group has been developing an issues brief to better define the problem, review successful practices of WBCSD member companies, and propose a path forward. A final reprint should be issued by the end of the year. UNEP is currently soliciting companies to participate in a pilot study.

I have questioned the generally accepted top-down approach of demanding that the large global companies promulgate their expectations for supplier performance, draft standards and specifications for material content, packaging, and other key performance attributes; and finally develop assessment protocols to verify supplier conformance to these requirements. This amplifies the inherent conflict of interest between the OEM (original equipment manufacturer) and the supplier, because of the need to share sensitive business data to identify and assess improvement alternatives. Who is responsible for necessary capital investments? How will the financial benefits be shared? And it tends to impose first world values on third world suppliers. Child labor repugnant to rich economies may be the difference between starvation and survival in poor economies. It is simply not practical for every company to develop its own auditing protocol and fund enough people to monitor a global supply chain. Even if they could, there would be no guarantee that those imposed performance standards would satisfy the development needs and priorities of communities home to the supplier factories.

The United Nations Environment Programme and SETAC are promoting a Life Cycle Management (LCM) capability framework that builds on a shared responsibility model to develop local capacity for effective action to achieve the sustainability goals of small companies and their host communities in developing economies. The objective is to incrementally build capacity for effective action and expand the sphere of concern for decision- making from local facilities to the value chain and eventually to civil society. This capability can be used for economic entrepreneurship to boost material production, or for social entrepreneurship to reform political institutions and ensure decision- makers are held accountable to local priorities for sustainable development. As well as building the competitive strength of local companies, the capability approach develops local capacity for informed policy debate and governance, thus minimizing the auditing burden on remote global customers.

Responsible companies managing sustainable value chains will not necessarily yield sustainable communities. Each community has an equal responsibility to take charge of its own future and to act to preserve its vitality.